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Microeconomics > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

the measurement of aggregate economic activity, particularly national income

A

National Income Accounting

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2
Q

the total market value of all final goods and services produced within a nation’s borders in a given time period.

A

Gross domestic product

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3
Q

What is the threshold number for Gross Domestic Product?

A

3%

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4
Q

the output produced by american owned factors of production regardless of where they are located

A

Gross National Product

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5
Q

the total GDP divided by total population; average GDP per person

A

GDP per capita

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6
Q

goods or services purchased for use as input in the production of a different final good or service

A

Intermediate Goods

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7
Q

are those produced at the end of a production sequence

A

Final Goods

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8
Q

the increase in the market value of a product that takes place at each stage of the production process

A

Value Added

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9
Q

the value of final output produced in a given period, measured in the prices of that period (current prices)

A

Nominal GDP

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10
Q

the value of final output produced in a given period adjusted for changing prices

A

Real GDP

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11
Q

the year used for comparative analysis; the basis for indexing price change

A

Base Year

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12
Q

What is the formula for computing real GDP?

A

Nominal GDP
Real GDP= ———————
Price index

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13
Q

an increase in the average level of prices of goods and services

A

Inflation

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14
Q

What is an acceptable inflation rate?

A

2% or below

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15
Q

What happens if the economy grows too fast?

A

it causes high inflation rates

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16
Q

the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology

A

Production Possibilities

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17
Q

the consumption of capital in the production process; the wearing out of plant and equipment

A

Deprecation

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18
Q

GDP less depreciation /GDP- depreciation=NDP

A

Net Domestic Product (NDP)

19
Q

expenditures on new plants, equipment, and structures in a given time period plus changes in business inventories

A

Investment

20
Q

total investment expenditure in a given time period

A

Gross Investment

21
Q

How can the total collection of plants and equipment grow?

A

If investment exceeds depreciation

22
Q

gross investment less depreciation

A

Net investment

23
Q

What are the four market participants?

A
  • Consumption
  • Investment
  • Government Spending
  • Net Exports
24
Q

goods and services used by households

A

Consumption goods

25
Q

What portion of our annual output does consumer spending claim?

A

2/3

26
Q

the plants, machines and equipment we produce

A

Investment Good

27
Q

What portion of our annual output does investments claim?

A

1/6

28
Q

federal , state and local governments purchase resources for policing the streets, teaching classes, writing laws, and building highways

A

government spending

29
Q

What portion of our annual output does government spending claim?

A

1/5

30
Q

goods and services sold to international buyers

A

export

31
Q

goods and services purchased from international sources

A

imports

32
Q

the value of exports minus the value of imports

A

Net exports

33
Q

How is GDP calculated in regard to market expenditures?

A 
GDP= C+I+G+(X-M)
C= consumption expenditure
I= investment expenditure
G= government expenditure
X= exports
M= imports
34
Q

What are the two sides of GDP?

A

one side focuses on expenditure (the demand side) and the other focuses on income (the supply side)

35
Q

total income earned by current factors of production: GDP less depreciation, plus net foreign factor income

A

National Income

36
Q

Income received by households before payment of personal taxes

A

Personal Income

37
Q

income of households after taxes; personal income less personal taxes

A

Disposable income

38
Q

How is disposable income calculated?

A

Disposable income=personal income-personal taxes

Disposable income= consumption+saving

39
Q

that part of disposable income not spent on current consumption; disposable income less consumption

A

saving

40
Q

What 3 places is the GDP distributed to?

A
  • Households
  • Businesses
  • Government
41
Q

How is the GDP distributed to Households?

A
  • In the form of disposable income

- Most income is spent on consumption

42
Q

How is the GDP distributed to businesses?

A
  • In the form of retained earnings and depreciation allowances
  • The income can be recycled in the form of business investment
43
Q

How is the GDP distributed to government

A
  • In the form of taxes

- People are hired or goods are purchased allowing income to flow back into the marketplace

Microeconomics (6 decks)

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